The taxable event in GST is
supply of goods or services or both. Various taxable events like manufacture,
sale, rendering of service, purchase, entry into a territory of state etc. have
been done away with in favour of just one event i.e. supply. The constitution
defines “Goods and Services Tax” as any tax on supply of goods, or services or
both, except for taxes on the supply of the alcoholic liquor for human
consumption.
The
Central and State governments will have simultaneous powers to levy the GST on
Intra-State supply. However, the Parliament alone shall have exclusive power to
make laws with respect to levy of Goods and Services Tax on Inter-State supply.
The term,
“supply” has been inclusively defined in the Act. The meaning and scope of
supply under GST can be understood in terms of following six parameters, which
can be adopted to characterize a transaction as supply:
Supply of
goods or services. Supply of anything other than goods or services does not
attract GST
Supply
should be made for a consideration
Supply
should be made in the course or furtherance of business
Supply
should be made by a taxable person
Supply
should be a taxable supply
Supply
should be made within the taxable territory
While these six parameters describe the concept of supply, there are a
few exceptions to the requirement of supply being made for a consideration and
in the course or furtherance of business. Any transaction involving supply of
goods or services without consideration is not a supply, barring few
exceptions, in which a transaction is deemed to be a supply even without
consideration. Further, import of services for a consideration, whether or not
in the course or furtherance of business is treated as supply.
Supply of Goods or Services or
Both
Goods as well as
services have been defined in the GST Law. The securities are excluded from the
definition of goods as well as that of services. Money is also excluded from
the definition of goods as well as services, however, activities relating to
the use of money or its conversion by cash or by any other mode, from one form,
currency or denomination, to another form, currency or denomination for which a
separate consideration is charged are included in services.
Schedule II to the
CGST Act, 2017 lists a few activities which are to be treated as supply of
goods or supply of services. For instance, any transfer of title in goods would
be a supply of goods, whereas any transfer of right in goods without transfer
of title would be considered as services.
Further Schedule III
to the CGST Act, 2017 spells out activities which shall be treated as neither
supply of goods nor supply of services or outside the scope of GST. This
includes:
Services by an
employee to the employer in the course of or in relation to his employment.
Services of funeral,
burial, crematorium or mortuary including transportation of the deceased.
Sale of land and
sale of building where the entire consideration has been received after
completion certificate is issued or after its first occupation.
Actionable claims
are included in the definition of goods, however, Schedule III provides that
actionable claims other than lottery, betting and gambling shall be neither
goods nor services.
Supply for Consideration
Consideration has specifically been defined in the CGST
Act, 2017. It can be in money or in kind. Any subsidy given by the Central
Government or a State Government is not considered as consideration. It is
immaterial whether the payment is made by the recipient or by any other person.
A deposit given in respect of the supply of goods or
services or both shall not be considered as payment made for such supply unless
the supplier applies such deposit as consideration for the said supply.
Further, when there is barter of
goods of services, the same activity constitutes supply as well as a
consideration. When a barber cuts hair in exchange for a painting, hair cut is
a supply of services by the barber. It is a consideration for the painting
received.
However, there are exceptions to
the requirement of ‘Consideration’ as a pre-condition for a supply to be called
a supply as per GST. As per schedule to CGST Act, 2017, activities as mentioned
below shall be treated as supply even if made without consideration:
Permanent transfer or disposal
of business assets where input tax credit has been availed on such assets.
Supply of goods or services or
both between related persons or between distinct persons as specified in
section 25, when made in the course or furtherance of business: Provided that
gifts not exceeding fifty thousand rupees in value in a financial year by an employer
to an employee shall not be treated as supply of goods or services or both.
Supply of goods— (a) by a
principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or (b) by an agent to his principal where the agent
undertakes to receive such goods on behalf of the principal.
Import of services by a taxable
person from a related person or from any of his other establishments outside
India, in the course or furtherance of business.
Supply in the Course or Furtherance
of Business
GST is essentially a tax only on
commercial transactions. Hence, only those supplies that are in the course or
furtherance of business qualify as supply under GST. Hence, any supplies made
by an individual in his personal capacity do not come under the ambit of GST
unless they fall within the definition of business as defined in the Act. Sale
of goods or service even as a vocation is a supply under GST. Therefore, even
if a famous politician paints paintings for charity and sells the paintings
even as a one-time occurrence, the sale would constitute supply. However, there
is one exception to this ‘Course or Furtherance of Business’ rule i.e., import
of services for a consideration.
Supply by a Taxable Person
A supply to attract GST should
be made by a taxable person. Hence, a supply between two non-taxable persons
does not constitute supply under GST. A “taxable person” is a person who is
registered or liable to be registered under section 22 or section 24. Hence, even
an unregistered person who is liable to be registered is a taxable person.
Similarly, a person not liable to be registered but has taken voluntary
registration and got himself registered is also a taxable person. It should be
noted that GST in India is State-centric. Hence, a person making supplies from
different States needs to take separate registration in each State. Further,
the person may take more than one registration within a State if the person has
multiple business verticals. A person who has obtained or is required to obtain
more than one registration, whether in one State or Union territory or more
than one State or Union territory shall, in respect of each such registration,
be treated as distinct persons for the purposes of GST. Hence, a supply between
these entities constitutes supply under GST.
Taxable Supply
For
a supply to attract GST, the supply must be taxable. Taxable supply has been
broadly defined and means any supply of goods or services or both which, is
leviable to tax under the Act. Exemptions may be provided to the specified
goods or services or to a specified category of persons/ entities making
supply.
Supply in the Taxable Territory
For a supply
to attract GST, the place of supply should be in India except for the State of
Jammu and Kashmir. The place of supply of any goods or services is determined
based on Sections 10, 11, 12 and 13 of IGST Act 2017.
Inter/Intra State Supply
The location of the supplier and the place of
supply determines whether a supply is treated as an Intra State supply or an
Inter State supply. Determination of the nature of supply is essential to
ascertain whether integrated tax is to be paid or Central plus State tax are to
be paid. Inter- State supply of goods means a supply of goods where the location
of the supplier and place of supply are in different States or Union territories.
Intra State supply of goods means supply of goods where the location of the
supplier and the place of supply are in the same State or Union territory.
Imports, Supplies from and to SEZs are treated as deemed Inter-State supplies.
Composite/Mixed Supply
A composite
supply means a supply made by a taxable person to a recipient comprising two or
more supplies of goods or services or any combination thereof, which are naturally
bundled and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply. For instance, a travel ticket
from Mumbai to Delhi may include service of food being served on board, free
insurance, and the use of airport lounge. In this case, the transport of
passenger, constitutes the pre-dominant element of the composite supply, and is
treated as the principal supply and all other supplies are ancillary.
The GST Law
lays down the tax liability on a composite or mixed supply in the following
manner.
Composite
Supply comprising two or more supplies one of which, is a principal supply,
shall be treated as supply of such principal supply.
Mixed Supply
comprising two or more supplies, shall be treated as supply of that particular
supply which attracts the highest rate of tax.
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